Demurrage

The term "demurrage" /dɪˈmɜːrɪdʒ/ from Old French demeurage, from demeurer - to linger, tarry - originated in vessel chartering and referred to the period when the charterer remained in possession of the vessel after the period normally allowed to load and unload cargo (laytime). By extension, demurrage refers to the charges that the charterer pays to the shipowner for its extra use of the vessel. Officially, demurrage is a form of liquidated damages for breaching the laytime as a it is stated in the governing contract (the charter party). The demurrage sometimes causes a loss to the seller as it increases cost of the total freight.

The reverse of demurrage is despatch. If the charterer requires the use of the vessel for less time than the laytime allowed, the charter party may require the shipowner to pay despatch for the time saved.

The term demurrage has been incorrectly extended to use in the hire or rental of assets other than ships. Loss of use resulting in additional hire is not demurrage.

In commercial ship chartering, demurrage is an ancillary cost that represents liquidated damages for delays. It occurs when the vessel is prevented from loading or discharging cargo within the stipulated laytime (see Affreightment: under Charter-parties). In the oil industry, it refers to the excess time taken to discharge or load What the case may be in excess of the allowed laytime. Laytime is the term used to quantify the time allowed within which an operation is allowed to be made. Demurrage is laytime consumed less laytime allocated (if any). The master of the ship must give a Notice of Readiness (NOR) to the charterer when the ship has arrived at the port of loading or discharge. The NOR informs the charterer that the ship is ready to load or discharge. The date and time of the NOR determines when laytime is to commence.

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